Cheap oil prompts ONGC’s biggest exploration binge

New Delhi, June 20: Oil and Natural Gas Corp (ONGC), India’s biggest explorer, is preparing to spend on its biggest ever crude binge as sub-$50 oil halves the cost of rigs and services.

State-run ONGC is contracting as many as five deepwater drill ships and dozens of jack up rigs as it launches a $5- billion development program in the Krishna-Godavari Basin off the east coast of India,ne sh Kumar S ar raf said in an interview. The company wants to make use of the dropin hiring rates for vessels and oilfield services to lower costs and boost profit, he said.

“This is the largest ever campaign undertaken by us ,” Sarraf said .“Never in the past have we had five rigs in offshore deep-water at one time. We believe this is the right moment when we can increase our investment.”

The company, which intends to spend R11 lakh crore by 2030 to raise output, is key to Prime Minister Narendra Modi’s target of cutting import dependence by 10% in the next six years. That goal is crucial for a country that imports most of its oil. India will be the fastestgrowing crude consumer in the world through 2040, according to the International Energy Agency.

“It makes immense sense for an oil explorer to undertake capex in the current times when oil field services costs and charter rates have dropped so sharply, especially if they have strong financial profile,” said K Ravichandran, co-head, corporate ratings at assessor ICRA. “Lower debt in relation to reserves gives ONGC exceptional strength in comparison to others.”

Offshore jack-up rigs which cost as much as $90,000 a day when oil was surging, now cost about half that, Sarraf said. ONGC shares rose 1.5% to R 213.85, the most since June 9, in Mumbai. The benchmark index S&P BSE Sensex closed up 0.9%. Bloomberg

The company wants to make use of the drop in hiring rates for vessels and oilfield services